i am a child of starter accelerators slidebean has received investments from startup chile dream
adventures and 500 starters i started my first company in 2011 and i had no idea how startups
worked when i say no idea i mean it i had never heard of venture capital never heard the concept
of an angel investor i was just out of college in costa rica where the startup ecosystem was pretty
much non-existent still our company then was accepted by dream adventures in new york which
sparked a chain of events that led us to you watching this video today so the point here is i
know my way around the startup world because dream it was a crash course in how the startup ecosystem
works it was also a soft landing in new york city that allowed me to build a network and one of the
people responsible for this is steve barsch who you probably remember as a guest for some of our
videos steve gave the intro talk at the program and i remember steve's talk distinctively as it
indeed was the beginning of the journey for me so today i'll be chatting with steve about how dream
it had to pivot their mod i'll be using some excerpts of our full conversation but if you
want to hear the full story you can find that full episode on our company forensics podcast
link in the description and available on spotify and all the podcast platforms also starting today
steve has joined our new expert network so you'll be able to book him for office hours for free if
you're in a founder's edition plan or on demand if you don't have a swiping account but anyway
back to the story the first company that i found that failed to raise capital and so did 13 out of
the 15 companies in that dream it batch but it was thanks to that experience that i have anything to
say about how fundraising works and in fact it was the time that sparked the initial idea for slight
b but just like that first company failed the dream it program the dreamhead accelerator system
failed and had to learn the hard way the stuff that worked and the stuff that didn't the 2010s
decade saw a spring of startup incubators and starter accelerators trying to copy
the successful y combinator model but many of them didn't survive the others had to pivot and that's
what we'll be talking about today but first let's understand the concept of the standard accelerator
usually an accelerator is a three to four month in person program 10 to 30 companies share the
same office space there's a small investment in the companies ranging from 15 000 to 50 000 in
exchange for five to ten percent equity there are office hours with experts and investors in
the program and it all ends with a demo day let's talk about that accelerator model because i mean
i was one of those the traditional accelerator and it was it was an amazing soft landing into
how startups work that's why i believe that this idea of bringing all the founders together into
the same office creating the sort of community is this accelerator crash course of three months
but obviously if you guys moved away from that and i believe that at that time this is 2012 when
i showed you we you know you could find a list of hundreds of accelerators who are trying to do that
same thing and you see less of that now i perceive that model as game changing for my journey as an
entrepreneur sure but for the accelerator side it doesn't seem to have worked that well for many of
them so what happened again at the end of the day we now consider ourselves a venture investor how
do we find the best startups from around the world how do we work with them how do we invest in them
so part of that in the journey like that you went through with us in 2012 and what's evolved part of
it is a lot of our thinking has evolved as to what stage of startup do we want to really work with
like we really enjoy working with startups that already have product now and are at early traction
or early revenue like most startups that come in to dream it today are two to three years old most
have probably raised around a quarter to a half million dollars already and they have product they
have either early revenue or early traction so the problem seems to have been around success rate
most of the companies i shared the office space with were very early and many even pre-product
for these companies myself included this capital injection from the accelerator was oxygen runway
and some time to develop their product so what was dreaming accelerating then well trying to
accelerate their access to capital the program mostly focused on building up to demo day with
the hope of meeting investors to raise an actual round however the reality of startups has changed
these days companies are meeting vc's post-revenue post-traction it seems that it's just too risky
to bet on 15 idea stage companies even though valuations are higher with post-revenue companies
the success rate also goes up significantly and this is why the bootstrapping part of building a
business is so important which of course extends to the skills in your team you need to be able to
get to that fundamental milestone on your own so instead of saying well you know we'll give you an
upfront check for a hundred thousand dollars but we want six percent of your company which is like
a 2.2 would have to do the math 2.2 million dollar evaluation we say we're going to do a completely
different offer in a different structure but it's because we're talking to a different type
of company and sometimes a founder will say to us hey wait could you give us a hundred thousand sure
and it's almost like an iq test if they'd sell 20 give six percent of their company for a hundred
thousand dollars that's a bad sign if they're willing to make that decision because that's a
really crappy valuation it really is there are few accelerators who are still operating on that model
the smaller check the smaller valuation should entrepreneurs still go for those accelerators i i
think if you know maybe there's an accelerator out there that's really tuned for what they're doing
maybe they're doing something that's in fintech or in suretech and there's an accelerator that
has a deep edge in that maybe there's some other value you're going to get out of that accelerator
possibly i don't know and i have to tell you i have a very strong bias here i think less than
five percent of quote unquote accelerators around the world have add any substantial material value
to a startup you touched on a few things on on the location of the companies and this and the stage
and the edge of entrepreneurs i want to go back to that is is is late 20s early 30s an ideal age for
a number of reasons as to to start a company or or the type of entrepreneur or founder that you guys
aim for we don't we don't aim for an age a race a religion a nothing it's just what comes at us
right and i think what what tends to happen again we had an entrepreneur start dreaming a few years
ago and she couldn't go out to the bar with us because she wasn't 21 right so it's kind of funny
it was like we're about to serve alcohol like wait how old are you i'm just turning 20 like
oh god we can't serve you alcohol so we work with younger entrepreneurs i think when you
look at some really interesting studies some of the most successful startups have been founded
by people in like their mid to late 30s and the reason why it's when people have been working
and toiling away in the industry really down deep and seen a problem that's really bothering them
so that classic like you started in your dorm room and you move out of there and you build a company
i mean i did that right i literally started a company i was still at university of michigan
it was my senior year that does happen but you see that a lot of successful companies are
people a little bit later in their career because they experienced something and they just said i
can't take it anymore which tends to be people a little bit more in their later 20s or early 30s
after they've got five or ten years of deep domain experience and they really find a pain point that
they want to go after we get this question a lot by the way and i couldn't agree more with steve's
point yes you can start a company at any age but your chances increase drastically once you've
had some real world experience and gather some real world insights that few people have that's
the way you come up with significant business opportunities another point i wanted to talk about
on the whole distance and the whole remote versus hybrid program is there's the phenomenon of what's
been created in california and silicon valley is quite amazing where you have all these companies
all these people experts in tech that you know move from company company and so bring that
knowledge right so there's widespread knowledge way beyond you know other startup communities
investors and so on so there's that community and people long for or aspire to moving to you know
probably top and list of silicon valley maybe new york and austin are coming up next but you guys
go with this approach of you know don't move to this location you don't have to be here you can
get away with not being here sure absolutely um and i'm asking for the audience that is
not based in california or new york or austin or philadelphia how can these guys access or
start untapping or start exploring those networks that are physically in places where they're not
first of all can i tell you the vast majority of companies that come to dream it are from new york
austin silicon valley and the pacific northwest like seattle so all those cities you're mentioning
that's where so many companies are like i want to go through dream it because i need to go
faster i'd say 50 of the companies that we have come from those areas that you're talking about so
that's one thing i think for for companies there's a couple things i get kind of passionate about for
companies that aren't in those core areas first of all the grass isn't always greener on the other
side certainly living and building a company in silicon valley there are challenges to that
you know i find a lot of engineers that are in those companies are always jumping to the next hot
shiny thing and where are my better stock options and it can be a very ephemeral relationship
it's a very expensive relationship right your cost of living is very high your cost of talent
is extremely high your quality of living you know everybody i know during the pandemic they're like
oh my god i'm i'm working from home i'm saving an hour and a half from commuting every single day
so those areas do come with a penalty but one of the things i want to talk about that we see a lot
of startups lament i guess might be a really good word is the lack of capital so i'm in some region
of florida i'm in illinois i'm outside chicago i'm i'm not in one of those primary tech hubs how can
i possibly raise capital let's just dive into that for a minute one of the things i say to startups
is i call [ __ ] on them right if you've got such a great startup you've got such a great idea
don't tell me that there's no local capital and that's why you can't get it funded
because if you're in minot north dakota and you probably don't know where that is and i
barely know where minot north dakota is but if you had the cure for cancer and you were
a startup based in minot north dakota and you had the cure for cancer and by the way no offense to
those people that are from minot right do you think that company would get funded a hundred
percent it's the cure for cancer so don't blame it that your local ecosystem doesn't have the capital
to fund your company get on an airplane whether you want to do it during a pandemic or not
set up a zoom video meeting get on a jetblue one of the things i said to startups look if you stop
your starbucks habit for about a month right for four hours a day for a month it's 120 bucks
fly from miami to to boston right it'll cost you 120 bucks stay in an airbnb for a couple bucks and
go pitch five vcs in boston and if you've got a great thing you will get funded but when you find
that you're having trouble getting the meeting and booking the meeting and you can't get funded
maybe the problem isn't the local capital don't blame it on well there's no local mundy that's
why i can't be successful startup i i call foul on that then go travel get in your car and drive in
your prius and and go pitch investors in a bigger city just to add a comment to that we did exactly
that we we started the company in costa rica made it cheaper lived here right until we had something
we could launch and use and then then we moved to new york and aimed at operating the company
from from there and we keep both offices one of the things we look at at dream it by the way is
entrepreneurs and startups that are clever on more than one access like oh i've got a great product
and we'll be like and what else because we find a lot of times for startups to be successful you
have to be clever in more than one way you're being clever more than one way right you're
running an arbitrage between costa rica and new york city you're arbitraging talent and location
and rent and all kinds of things all right so i hope that was useful if you want to hear more
of steve's fantastic points listen to the full interview in our podcast once again link in the
description and available on spotify remember you can book steve for office hours and remember to
hit that subscribe button if you want to stay tuned to our content we'll see you next week
you